"What's good for GM..."

Posted Wednesday, June 3, 2009, at 10:43 AM

"What's good for General Motors is good for the country," a former president of the company said 50 years ago.

Today, that apparently means bankruptcy.

The government, and by extension all taxpayers, will wind up with a controlling interest in the company (60 percent of its stock). And in the long run, the move may save the company as it protects itself from its creditors and reorganizes.

The ripple effect is enormous, however. At least one major parts supplier has gone under already, costing thousands of jobs. GM will be cutting its workforce and already has cut some of its sales outlets, costing thousands of more jobs. The creditors who don't get paid, or get paid only a fraction of the dollars owed, also will be hurt badly.

And all this because of some truly stupid decisions made by corporate executives over the years, as well as unions that demanded pay scales so great the company simply couldn't remain profitable.

Furthermore, it places Obama and the Democratic Party that controls Congress in an uncomfortable position. Long known as the defenders of unions, the bankruptcy they will help orchestrate will hurt those unions enormously.

This reorganization will allow, among other things, the company to functionally break the union and bring benefits and pay scales down (from $45/hour) to levels that would give the company a chance to survive. But those employees who remain with the company, and see their wages go down significantly, will be badly hurt as well. Even survival sometimes has a terrible economic price at the human level.

In the long run, it may save what is left of the auto industry in the United States, which represents literally millions of both direct and indirect jobs.

But GM will become a poster child for the poor decisions "super corporations," both manufacturers and on Wall Street, have made in the name of greed over recent years.

Like it or not, it is going to trigger a wave of corporate oversight regulations that will probably be unprecedented in U.S. history, and it will be a long time before the pendulum begins to swing back to the middle, where it belongs, between no regulation, which got us into this mess, and over-regulation, which has its own well-known problems.

In the end, however, the change that is needed most is a new mindset among corporate leaders that profits must be part of an overall strategy that supports workers and stockholders, both, and that sound business practices must take precedent over the need for multi-millionaires to become billionaires. After all, you really can only spend so much on yourself. It's not a game to see who can collect the most vacation homes, yachts and private jets. Eventually, you have to start thinking about the people who work for you and the country as a whole.

Yes, and why not send all of that bailout money to China as GM plans/is doing? Importing cars! Hummer to be sold to China! Just what I want...my husband, in a Hummer in Iraq, etc., that was built in China. More Obama logic here and change we can believe in. Soon, we will all be forced to move to China and Mexico for work because that is where ALL of the industry has gone and WE allowed it. Have a nice day all.

-- Posted by OpinionMissy on Wed, Jun 3, 2009, at 10:50 AM

"Like a rock." The theme of GM for many years has come to fruition, they now sit like a rock and absorb the bailout that will save them.

The government, who are now 60% owners, have mandated the American auto makers build cars that have greater fuel efficiency. The research and development costs to comply with this mandate will be in the millions of dollars. This will increase the cost of vehicles that are already too expensive. Consumers have no choice but to invest in foriegn made vehicles. The circle continues...

-- Posted by jtrotter on Wed, Jun 3, 2009, at 11:20 AM

Allowing workers 6 no-call no-shows every year is an example of why GM went down. Management should never have agreed to that and the workers should not need nor want it.

Yes, billionaires being greedy is a problem. I call out the supposed poor peasant union worker that cries that his nice pension dried up. They claim the moral high ground but they repeatedly refuse to take cuts. The pay cut was not because mgmt. wanted to stick it to them. Its because the demand for GM's products and services has been on the decline since the early 80's. When the revenues go down, so should the expenses. Labor is the biggest expense to a business.

The workers took their $29 per hour so they could turn a wrench on 10 lug nuts per car. Their presence does not contribute $29 per hour, that is not debatable. The same sense of entitlement that we condemn the white collar world for, is present here on the blue collar side of the fence. The workers greed partly dug this hole. Pensions, retirements, benefits are expensive especially when multiplied over thousands of workers. When the downturn was happening, did those receiving the benefits consider lessening the payment in hopes of extending its life? No, they sure did not. No claim of ignorance here. UAW was told by industry experts and Wall Street that ratcheting down the amounts would extend the life of the jobs. Their response was that they had a duty to maximize the amounts being paid now and the future is irrelevant. So the UAW gambling with the fortunes of their poor, tired, beaten-down workers does not sound very utilitarian. It sounds like they are money grubbers just like those that they condemn and villify.

-- Posted by twilcox1978 on Wed, Jun 3, 2009, at 11:46 AM

The government owning most of GM sounds good on paper but it is a risky venture. I have read the documentation and it assumes that GM will either buy itself back or that Italian automaker Fiat is going to take over. If they wanted absolute control over GM, they could easily do it. If they were doing it simply to please the court of public opinion, they would simply give these overpaid, entitled, unionized workers their jobs back and take it in the shorts. It comes down to the government gambling that GM will become profitable if a new game plan is followed. The government is asking that GM follow the same business plan that got Honda out of trouble in the 70's. Well, if you have not awaken since 1975 one will know that Honda is doing quite well both here and abroad. They are simply trying to please everybody by coming to the rescue. Borrowing and trying to play God over every failed institution.

If this was about tyranny and oppression like Mao, Pol Pot, Hitler, Or Caecescu there would be a much different strategy. Hitler did not borrow or have stimulus plans. That is a matter of fact. His quasi-economic recovery was done by forcing people to do it. Gun to the head is great motivation. Well be as ignorant as you want but I dont see police or soldiers pointing guns at no one. Our prison population has not spiked. Our immigration rates are down because they are no jobs for them to take. If you dont believe me, read the newspapers in Mexico. There are ways to read English versions of them so dont play dumb. Ok, enough for this rant.

-- Posted by twilcox1978 on Thu, Jun 4, 2009, at 11:03 PM

Last I heard, the production of the Hummers will remain in the U.S..

And the military Humvees are a separate entity; the chinese company buying Hummer will have nothing to do with production/oversight of military vehicles.

-- Posted by MrMister on Fri, Jun 5, 2009, at 3:11 AM

Prison populations increased by 650% during the time of 1926-1932 in Germany. That is probably understated due to poor media coverage and most people being too concerned about simply surviving to care about the bigger political picture.

There was no middle ground or pre-emptive stage in Hitler's time. When he was appointed Chancellor, the military state began right away. The political history prior to Hitler is nothing like today. Germany had just unified and the instability was overwhelming. Enough history, I just dont think this is state-sanctioned tyranny on the scale of Nazi Germany or Cold War Eastern Europe.

About GM, one likely scenario is that the new GM will manufacture small cars and that production lines will be smaller and less labor-intensive. UAW in all its glory is going to cause legal troubles. When they view this new landscape, they will get on their pulpit and try to fight for their workers. They were part of the demise and so need to change. This new GM will be a smaller operation and so will not warrant high wages and over-the-top labor contracts. That will upset some because they feel that GM should be at the throne and therefore workers granted infinite stability and prestige.

For those long timers at GM, lowering their demands would be a huge step forward. If the collective whole that receives pensions, health insurance, etc. would lower their demands they would ensure the long term life of it. Demanding full pensions right here and right now is going to shorten the life of these fragile funds. It is not right that they have to settle for less. For the good of all that are affected, each one should settle for less. I simply tire of the Robin Hood approach. That it is always peasants versus the rich. Anybody not on the assembly line must be some rich, entitled, pompous, out of touch jerk that preys upon the peasants. That is not always the case.

-- Posted by twilcox1978 on Fri, Jun 5, 2009, at 12:14 PM

no matter what, this will be unpopular due to the fact that Joe and Jane factory worker that have little education and no other work experience and now have to change. Change is inevitable. The cushy, stable manufacturing job is a thing of the past.

Politicians did not cause GM to be unprofitable. They did not help the trend but GM's executives and UAW were the larger players.

The gov. is trying to be the White Knight. Trying to be the hero and save everyone. As we all know, you cant help those who wont help themselves. GM needs a fundamental shift that the gov. cant teach. Political rhetoric would tell one otherwise but politicians are not great businessmen. They are going to try to take all the credit if this situation is made better. In the end, imposing their will upon GM has good intentions but it cant solve the bigger picture. The lack of demand for GM's product can not be legislated or politicized. This reality will have to be dealt with and so the transition is made.

-- Posted by twilcox1978 on Mon, Jun 8, 2009, at 2:13 PM

I used to have a 1981 VW rabbit and it got 32 or so MPG. It was easy to fix and could easily pass emissions here in Ada county. I hear you on the inflated prices.

American automakers need to trim down the production lines and make their companies smaller. That would also help the workers by making it more stable and predictable. The government is trying to restore the old way of doing things by borrowing to prop up the dinosaur of GM. Again, as I usually harp on... Let them be and let them learn. With the exception of AIG, I would say let them fail. supporting GM tells them they can go back to their old but flawed ways. The culture has to change there and so by them biting them dust that forces a new philosophy.